Setting the Record Straight: Important Landlord Reports and Tax Deductions

To maximize the value of your investment property, you want to view it as if it were a store or online operation. The good news is that your second home -- or properties if you are a master monopoly player – generates revenue in the form of rental income. The bad news is that it comes with overhead in the form of mortgage, insurance, and property tax payments as well as maintenance and repair expenses.

As such, like any smart business person, it is to your advantage to keep copious records on these properties to save money, facilitate any audits, and provide evidence if you are ever taken to court.

No Detail is Too Small

As a landlord, you will need to keep a number of records to cover all the bases. Listed below are some of the types of data that you need to keep nearby:

Payables

Receivables

Vital Tenant Data

Other Records

Mortgage

Property tax

Homeowners’ Insurance

HOA

Utilities

Gardner

Pool service

Renovations

Repairs

Maintenance

Security deposits

Pet deposits

Application fees

Parking passes

Monthly rent payments

Leasing agreements

Addendums

Payment receipts

Tenant contact information

Claims

Damage log

Photos with time and date stamp

Late payments

Receipts for repairs and maintenance

Evictions

Non-payments

History of disputes

Be sure to keep separate and distinct records on payables, receivables, each tenant, and other matters, such as damages or any legal matters.

Take Deductions That Make Cents

There are a few key deductions that you must be aware of so you can ensure the greatest investment from your rental properties. Here are some things to remember:

If you own more than two homes, you have to select which one to treat as your second home for tax purposes, but you can change which home qualifies on an annual basis.

Income on these properties must be reported as rental revenue if you rent the home for more than fifteen days out of the year.

A percentage of the mortgage interest can be deducted on loans up to $1 million on first mortgages, home equity loans, or lines of credit.

A percentage of the property taxes, private mortgage insurance, and loan points paid on those mortgages can be deducted.

Rental properties can have a percentage of the utilities, maintenance services, and other related expenses that will go against the income made on the property for that year.

You cannot deduct the following expenses:

HOA dues.

Insurance.

Appraisal fees.

Home improvements except for possibly reducing your taxes when you sell your home.

Compiling the Paperwork

While you may think it will not be that difficult to recreate the previous year’s worth of receipts and records just before you need to hand everything over to the accountant, you will soon be grumbling under piles of paperwork once it dawns on you just how time-consuming such as task can be.

Imagine having more than one property and your headache will then grow to migraine proportions. To get it done in time for tax season, you may end up cutting corners and missing deductions that could have saved you money. Make it easier on yourself by starting to keep records from day one of the rental so that your paperwork has a “home” as it comes in on that property.

Old School Record-Keeping: Paper and Computer Files

These files are a great start, but paper files – or hard copies – can be just as ineffective as not having any records. That’s because everything is crammed into folders where receipts may end up misplaced or lost. There may be no clarity as to which receipt should be assigned to which rental property or in which category it should be separated for in terms of maintenance or repair. All these records will then be handed to the accountant to sift through, which could end up costing you more money as well.

Other negative aspects of old school record-keeping include the lack of privacy or confidentiality. In this day and age where identity theft is a serious threat, data security is top of mind for everyone. Files can also be stolen or destroyed in a fire or other natural disaster.

Computer files are a step up in terms of efficiency and convenience, but they also come with issues. Files can also be lost or compromised by viruses and hackers. There has to be a better way to keep information in a safe – yet easily accessible – environment.

Move to High-Tech Record Keeping

Consider tossing out the old methods of record-keeping for an online log that can track all incoming and outgoing payments for documentation and tax deduction purposes. Services like Ownersite Technologies provide an online depository to keep all types of information about your investment properties – as well as your primary residence.

The File Manager supports DOC, XLS, PDF, and TXT files. Images, such as digital photos of all the properties, can be stored in the Photo Album or Inventory section of the Web portal. The confidentiality of this sensitive information is protected because all of your files are stored on Ownersite Technologies’ database and not the file system. This means that the files cannot be accessed or viewed when not logged into the application.

With all your records in one place and in a form that is easy to share and send to your accountant, the business of second home investment should be on the path to success.

Ownersite Technologies is happy to offer a free 30-day trial of Home Ownersite, the comprehensive, web-based tool that simplifies home inventories and recordkeeping. With plans starting at only $29.95 per year, Home Ownersite is the perfect tool to manage the complete ownership lifecycle for your home and valuables. To start your free, no-obligation trial or to review the different plans available, please click here.